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Port chaos and bird flu hit Woolworths sales

| Retailer trading results

 

By: Nick Wilson – News24

Shares in Woolworths fell nearly 2% on Tuesday morning after it warned that SA's sputtering economic growth, a bird flu epidemic, and port chaos contributed to volume declines in its local food and fashion businesses.

The company also said in an update it was fighting for market share, with turnover and concession sales in its food business growing by 8.4% in the 26 weeks to 24 December, when underlying product inflation averaged 9.1%. Comparable stores grew their turnover 7.2%, with the company describing its growth as "solid" given the conditions.

The group said it faced tougher conditions in both Australia and SA, given the sustained effect of interest rate increases and higher living costs, which has weighed on discretionary spending.

"In South Africa, our business operations were further disrupted by higher levels of load shedding, congestion at the ports, and the impact of avian flu on the availability of key food product lines."

The group added that sales had picked up in the last six weeks of its reporting period when it saw volume growth.

Its fashion, beauty and home business was hit by the late arrival of its summer range as a result of port congestion. Turnover in this business grew by only 2.2% in the six months, compared to average price increases of 11.4%. Sales growth picked up to 3.8% in the last six weeks, with the company benefiting from "the successful execution" of its Black Friday promotions and festive season trade.

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In Australia and New Zealand, trading conditions continued to deteriorate, the company said.

The company's Country Road brand saw sales decline by 5%, or 9.5% in comparable stores, but it noted this was off a high base due to Covid-19 lockdowns easing in the prior year. Consumer sentiment in Australia is at near-record lows, however, and household savings the weakest since the global financial crisis, the company said.

There were some green shoots, however, with sales in the last six weeks of the period turning positive, with growth of 1.3%.

Overall, Woolworths expected earnings per share and headline earnings per share to fall by more than a quarter. This is distorted by the inclusion of the David Jones department store chain in the prior period. Woolworths disposed of David Jones last year, and earnings from continuing operations are only expected to fall by as much as about 10%.

The group's overall turnover and concession sales from continuing operations increased by 5.4% and by 4.4% in constant currency terms.

In late-morning trade, the group's shares were down almost 2% at R65.30, earlier falling to as low as R63.83. They have lost just over 15% in the past year.

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